Stamp Duty Land Tax Reduction — Threshold Changes
Published 23 September 2022
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This publication is available at https://www.gov.uk/government/publications/stamp-duty-land-tax-reductions-for-residential-properties/stamp-duty-land-tax-reduction-threshold-changes
Who is likely to be affected
Purchasers of residential property in England and Northern Ireland.
General description of the measure
This measure increases the amount that a purchaser can pay for residential property before they become liable to Stamp Duty Land Tax (SDLT), while maintaining the higher rate of 3% on additional dwellings.
The measure increases the residential nil-rate tax threshold from £125,000 to £250,000.
The nil-rate threshold for First Time Buyers’ Relief is increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief is increased to £625,000.
The measure means that all individuals purchasing residential property on or after 23 September 2022 will pay less or no SDLT.
Policy objective
This measure is part of government’s commitment to support homeownership and promote mobility in the housing market, in turn supporting economic growth. Increased property transactions also add to residential investment and spending on durable goods.
Background to the measure
This measure was announced by the Chancellor on 23 September 2022.
No consultation has been held as this is a change which is wholly relieving. It would not be in the public interest to consult, as this may have an adverse effect on the housing market if buyers delayed purchases during the consultation period.
Detailed proposal
Operative date
This measure will apply to transactions with effective dates on and after 23 September 2022.
This measure does not apply to Scotland or Wales who operate their own land transactions taxes.
Current law
The main SDLT legislation is at Part 4 of the Finance Act 2003. All statutory references are to that Act.
The residential rates for SDLT applicable to purchases other than higher rates purchases can be found at Table A: Residential of section 55(1B):
| Relevant consideration | Percentage |
|---|---|
| Up to £125,000 | Nil |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
The rates for purchases where rent is taxed can be found at Table A: Residential in paragraph 2(3) of Schedule 5:
| Relevant consideration | Percentage |
|---|---|
| Up to £125,000 | Nil |
| Over £125,000 | 1% |
The rates for purchases subject to the higher rates can be found in Table A: Residential at paragraph 1(2) of Schedule 4ZA:
| Relevant consideration | Percentage |
|---|---|
| Up to £125,000 | 3% |
| The next £125,000 (the portion from £125,001 to £250,000) | 5% |
| The next £675,000 (the portion from £250,001 to £925,000) | 8% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 13% |
| The remaining amount (the portion above £1.5 million) | 15% |
Section 57B and Schedule 6ZA make provisions for qualifying first time buyers to pay tax under rates and bands set out in Table A: Residential at paragraph 4 of Schedule 6ZA:
| Relevant consideration | Percentage |
|---|---|
| Up to £300,000 | Nil |
| Any remainder not exceeding £500,000 | 5% |
First Time Buyers’ Relief is currently restricted to purchases where the amount paid is £500,000 or less as specified in paragraph 1(2).
Proposed revisions
Legislation will be introduced in the Stamp Duty Land Tax (Reduction) Bill to amend:
Table A of section 55(1B) (for purchases other than higher rates purchases) as follows:
| Relevant consideration | Percentage |
|---|---|
| Up to £250,000 | Nil |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Table A at paragraph 2(3) of Schedule 5 (for rent) as follows:
| Relevant consideration | Percentage |
|---|---|
| Up to £250,000 | Nil |
| Over £250,000 | 1% |
Table A at paragraph 1 of Schedule 4ZA (for higher rates purchases) as follows:
| Relevant consideration | Percentage |
|---|---|
| Up to £250,000 | 3% |
| The next £675,000 (the portion from £250,001 to £925,000) | 8% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 13% |
| The remaining amount (the portion above £1.5 million) | 15% |
Table A at paragraph 4 of Schedule 6ZA (for First Time Buyers’ Relief) as follows:
| Relevant consideration | Percentage |
|---|---|
| Up to £425,000 | Nil |
| Any remainder not exceeding £625,000 | 5% |
In addition, the £500,000 specified in paragraph 1(2) of Schedule 6ZA is increased by £125,000 to £625,000. The effect will be to restrict First Time Buyers’ Relief to purchases where the amount paid is £625,000 or less, instead of the £500,000 or less currently applicable.
Summary of impacts
Exchequer impact (£m)
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 |
|---|---|---|---|---|
| -795 | -1450 | -1535 | -1595 | -1655 |
These figures are set out in table 4.2 of the Growth Plan 2022.
The costings have been produced using the economic forecast from Spring Statement 2022, as this is the latest available official forecast. These costings will be finalised and accounted for in the public finances at the next forecast.
Economic impact
Reductions in SDLT rates, or increases in the thresholds, support house purchases and so property transactions and house prices. Increased property transactions add to residential investment and spending on durable goods.
Impact on individuals, households and families
Individuals and their families buying a residential property are expected to be positively impacted by a reduction of SDLT as it will make it easier to buy a home. Overall, there is expected to be no negative impact on family formation, stability or breakdown as this proposal could make it easier for families to purchase a family home when they were previously unable to.
Customer experience is expected to remain broadly the same as it does not significantly alter existing processes.
Equalities impacts
The benefits of this measure will fall to those who are buying residential property, which is expected to be in line with the existing distribution of home ownership. This measure is not expected to impact on this distribution for any protected group.
Impact on business including civil society organisations
This proposal is expected to have a negligible impact on businesses associated with the property and conveyancing industry.
One-off costs will include familiarisation with the change and could also include making minor IT and software changes to take account of the change. There is expected to be no continuing costs. This measure is not expected to impact civil society organisations.
Customer experience is expected to remain broadly the same as it does not significantly alter existing processes.
Operational impact (£m) (HMRC or other)
HMRC will have to incur costs to change IT systems. These have yet to be fully quantified but are estimated to cost approximately £500,000.
There will also be extra staff costs to support customers. These have yet to be fully quantified but are estimated to cost approximately £2,500,000.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns.
Further advice
If you have any questions about this change, contact the HMRC SDLT Helpline.
Declaration
Richard Fuller MP, Economic Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.